Hike Rush Gaming Universe Implements Workforce Reduction, Letting Go of 22% of Employees

Hike Rush Gaming Universe Implements Workforce Reduction, Letting Go of 22% of Employees

Hike’s Rush Gaming Universe (RGU) has recently undertaken a significant workforce reduction, resulting in the departure of approximately 55 employees. This downsizing measures have affected around 22% of the total workforce within the company. The decision to implement these layoffs comes as a consequence of the Indian government’s decision to impose a 28% Goods and Services Tax (GST) on online real-money games. This move is seen as a direct response to the broader regulatory changes in the online gaming industry.

This development marks the second instance of a company feeling the repercussions of the government’s decision regarding GST on online real-money games. The decision has had a notable impact on the workforce within the gaming sector, prompting companies to make difficult decisions to navigate the evolving regulatory landscape and economic implications brought about by the taxation changes.

Kavin Bharti Mittal, the CEO and founder of Hike, has addressed the impact of the government’s decision to increase GST on online real-money games. He stated, “Business is in the best shape ever. This 400% increase in GST is a bazooka pointed at us. We’ll need to absorb some of it.” This comment underscores the significant financial challenge that the elevated GST rate presents to the company’s operations. The substantial rise in taxation has prompted Hike to consider adjusting its financial strategies in response to the new regulatory landscape.

As the situation unfolds, Entrackr, a news platform, has sought to gather additional insights by reaching out to Mittal for further clarification and details regarding the company’s plans to navigate this challenging scenario. The increase in GST has forced companies within the online gaming sector to reevaluate their financial models and explore ways to manage the impact of the regulatory changes.

Hike, once recognized as a peer-to-peer messaging application, garnered substantial investment, raising over $260 million in funding from prominent investors such as Tiger Global and Tencent. However, the company made a significant strategic shift by discontinuing its core messaging product. In January 2021, Hike transitioned to a new domain and ventured into the real-money skill-based gaming sector.

This transformation marked a pivotal moment in Hike’s trajectory, shifting its focus from messaging to the realm of skill-based gaming for real money. The transition exemplified the company’s adaptability to changing market dynamics and its determination to explore new avenues in the ever-evolving technology landscape. This shift also positioned Hike to navigate a unique set of challenges, including regulatory changes and financial implications associated with the gaming industry’s evolving regulatory environment.

Following its transition into the real-money skill-based gaming arena, Hike embarked on a fresh start and quickly secured funding to support its new direction. The startup managed to secure undisclosed funding from Polygon, a blockchain scaling service provider based on Ethereum. This initial injection of capital provided the necessary resources to kickstart Hike’s foray into the gaming sector.

Continuing its trajectory of fundraising, Hike achieved another undisclosed funding round in May 2022. This round was bolstered by notable investors, including Web3 investor Jump Crypto and Tribe Capital, among others. The financial support from these investors not only reinforced Hike’s position in the gaming space but also enabled the company to further develop its skill-based gaming platform and expand its operations.

Hike witnessed a substantial surge in its revenue from operations during the financial year 2022, reaching Rs 19.21 crore, a noteworthy increase compared to the Rs 18 lakh recorded in the preceding financial year, FY21. Concurrently, the company succeeded in curbing its annual losses, which diminished by 7.3% to Rs 118.7 crore in FY22 from Rs 128 crore in FY21. This shift towards a narrower loss reflects Hike’s efforts to optimize its financial performance and manage its expenditures more effectively.

Hike’s growth trajectory has been remarkable, with the company asserting a fourfold increase in its operations over the past year. This growth has propelled Hike towards operational profitability, a significant milestone reached in October 2022. These accomplishments underscore Hike’s commitment to expanding its presence within the gaming industry and capitalizing on emerging opportunities. While the company’s financial report for the fiscal year 2023 has yet to be filed, its recent achievements reflect its dedication to achieving sustainable growth and financial stability.

The recent alterations in GST regulations are anticipated to prompt additional adjustments among startups involved in real-money gaming. These changes could drive a series of strategic shifts within the industry. An example of this trend is Mobile Premier League (MPL), which recently took the step of laying off 350 employees, attributing the decision to the new tax structure. MPL asserted that the revised rules would lead to a substantial rise in its tax obligations, potentially elevating the burden by as much as 350-400%.

The impact of the GST amendments is reverberating across the gaming sector, prompting startups to reconsider their operations, cost structures, and workforce sizes to align with the revised financial landscape. The decision by MPL to reduce its workforce due to the anticipated tax increase underscores the challenges that companies within the industry face as they grapple with the evolving regulatory framework and its financial implications. As the sector continues to navigate these changes, startups are compelled to make strategic adjustments to remain resilient in a shifting landscape.

The ramifications of the GST council’s decision have raised concerns within the gaming industry, with multiple stakeholders highlighting the adverse effects on gaming startups. This change has prompted a collective response from industry players who are expressing their reservations about the new tax structure. Notable real-money gaming platforms like Nazara Technologies, Baazi Games, and Winzo Games, alongside the All India Gaming Federation, have emerged as vocal advocates against the impending implementation of the new GST regulation, set to take effect from October 1.

These key players within the real-money gaming sector are jointly voicing their apprehensions due to the expected negative impact on their operations. Their stance underscores the united industry perspective against the potential financial repercussions stemming from the revised GST rules. As October 1 approaches, the industry is poised to witness further discussions and actions aimed at addressing the concerns and advocating for a more favorable regulatory environment for gaming startups.